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Paulson: High-Level Talks Key to Reducing Surplus
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US Treasury Secretary Henry Paulson insisted on Wednesday that new high-level talks with China offer the greatest chance of success in reducing the soaring US trade deficit.

He made the remarks in response to queries from the Senate Banking Committee, where lawmakers said nearly 3 million manufacturing jobs have been lost since early 2001, a period during which the trade deficit has hit records for five consecutive years and the imbalance with China has soared to all-time highs.

Many senators said they were upset that the Bush administration did not cite China as a currency manipulator in a report it sent to Congress in December.

Such a designation could have led to punitive sanctions against imports had the United States filed and won a case before the World Trade Organization.

Paulson said he believed a better approach was the new Strategic Economic Dialogue he began with China in December, involving seven members of the Bush cabinet in meetings with top Chinese officials in Beijing.

He said those twice-a-year discussions offered the best hope for China to make the types of economic changes that would reduce the US-China trade gap.

He said he would make the discussions a top priority in the two years left in the Bush administration. The next meeting is scheduled for May in Washington.

"I really believe we have a plan in place that gives us the best chance of making progress," Paulson said.

He said pursuing economic sanctions against China could cause the Chinese government to abandon reform efforts.

At a recent national conference, Minister of Commerce Bo Xilai said reducing China's huge trade surplus was the main item on his ministry's agenda this year. China's trade surplus increased more than 74 percent year-on-year to US$177.5 billion in 2006.

Bo said an overly-large trade surplus was not good for China's sustained economic growth; and the government would reduce exports and increase imports.

(China Daily via agencies February 2, 2007)

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